HM&P lawyer shares solutions to accelerate value-added tax refunds for businesses

With the aim of providing in-depth legal perspectives on Value-Added Tax (“VAT”) refunds, Lawyer Nguyen Nhat Duong, representing HM&P Law Firm (“HM&P”), recently shared insights on this issue with The Saigon Times. HM&P’s discussion not only covered the legal regulations governing the VAT refund process but also highlighted practical challenges faced by businesses and offered effective solutions to mitigate risks and expedite tax refund procedures.

VAT refund – A crucial but challenging process

Lawyer Nguyen Nhat Duong emphasized the critical role of VAT refunds in business operations, particularly for import-export enterprises. He pointed out that VAT refunds have significant financial implications, as the refunded amounts often account for a substantial portion of a company’s cash flow. However, in practice, businesses frequently encounter numerous obstacles in obtaining refunds, with some cases taking one to two years—or even longer—without resolution.

According to Lawyer Duong, some of the most common reasons for delayed VAT refund applications include:

• Discrepancies between accounting records and tax declarations: Many businesses face difficulties when the input VAT recorded in their accounting books does not match the figures reported in tax declarations. While these discrepancies may not necessarily affect the refundable amount, they often lead to delays or rejections by tax authorities.
• Use of invoices from high-risk suppliers: One of the major challenges is when businesses unknowingly use invoices issued by suppliers flagged as high-risk by tax authorities. In such cases, tax authorities typically require detailed explanations and extensive supporting documentation, such as sales contracts, delivery records, and bank payment receipts, to verify the legitimacy of transactions. The scrutiny of invoices can place a heavy administrative burden on businesses, especially small and medium-sized enterprises (SMEs) that may not maintain comprehensive documentation.
• Incorrect tax rate declarations: Misreporting the applicable VAT rate for goods and services is another common issue. Particularly, with the government’s implementation of VAT reduction policies, inconsistencies in tax rate interpretation among local tax authorities have led to disputes between businesses and tax agencies, resulting in financial and time-related consequences.

Expert-driven solutions to address VAT refund challenges

Drawing from extensive experience in legal advisory services, Lawyer Nguyen Nhat Duong proposed comprehensive solutions to streamline the VAT refund process and safeguard the legitimate rights of businesses. He outlined key recommendations from two perspectives:

For tax authorities:

• Analyzing the causes of data discrepancies: Tax authorities should thoroughly investigate the reasons behind accounting and tax declaration mismatches and fairly consider reasonable explanations from businesses.
• Focusing on high-risk invoices: Instead of requiring businesses to justify all invoices, tax authorities should prioritize the review of invoices with clear risk indicators. This approach would optimize time and resources for both parties.
• Ensuring consistency in tax rate determination: Coordination among tax authorities is essential to establish a standardized approach to VAT rate classification, preventing businesses from facing undue disadvantages due to conflicting interpretations across different regions.

For Businesses:

• Ensuring accurate tax declarations: Companies should carefully reconcile accounting records with tax declarations to minimize errors and inconsistencies in VAT filings.
• Maintaining comprehensive documentation: Proper collection and retention of supporting documents—such as contracts, delivery records, VAT invoices, and payment receipts—are crucial to facilitating smooth interactions with tax authorities.
• Consulting tax and legal experts: Seeking professional advice from tax specialists or lawyers can help businesses navigate regulatory complexities, ensure compliance, and mitigate risks.

Representing HM&P, Lawyer Nguyen Nhat Duong not only identified key VAT refund challenges but also proposed practical and actionable solutions, empowering businesses to proactively manage tax-related issues. Furthermore, his insights serve as valuable recommendations for regulatory authorities to consider in enhancing support mechanisms for businesses. Given the complexities of the VAT refund process, a collaborative approach between businesses and tax authorities is essential for improved efficiency and fairness.

With extensive expertise in tax and corporate law, HM&P remains committed to serving as a trusted legal partner, assisting businesses in resolving complex legal matters, particularly those related to taxation.

HM&P extends its gratitude to The Saigon Times for providing a platform to discuss the difficulties businesses face in the VAT refund process and to share legal solutions aimed at expediting tax refunds. We hope this information will help businesses enhance regulatory compliance and optimize operational efficiency in today’s business environment.